Risk management policies in need of review (Sanchia Temkin – BD)

“South African companies need to revisit their risk management policies in the wake of the global recession, say corporate governance experts”.

“More focus has also been placed on the role of risk management due to the report of the King Committee on Corporate Governance in SA, in which its chairman, Mervyn King, points out that accountability and transparency (of the board) are paramount”.

Sanchia Temkin writes in today’s issue of Business Day Companies need to review risk management policies, plans and observes that there is a new focus on the overall responsibility of the board of directors.

Here are some extracts from the article:

“The King 3 report takes a process-driven approach to risk management that emphasises the overall responsibility of a company’s board, which should have a risk management policy and plan in place.

However, Tom Wixley, a corporate governance analyst and co-author of the book Corporate Governance, says the King 3 report has gone ‘overboard in engineering risk management’.   It tends to make risk management bureaucratic rather than part of the day-to-day business of the company.

One of the dangers of implementing a complex risk management system is that the process of identifying and managing risk can become unwieldy, Mr Wixley says”.

Tom Wixley stresses the need for management to retain responsibility.

“Care should be taken to ensure that line management retains responsibility and that risk management does not become a parallel system of management.   If an organisation does appoint a chief risk officer, this should be done to assist the CEO and line management, not to usurp management’s role.

Mr Wixley says every company needs to think about risk and identify risks early and their consequences.   ‘Companies need to establish internal controls to mitigate the risks’.”

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